There is no doubt about it, Japan’s crisis is our crisis.  One of our closest allies is currently doing its best to quickly recover from the effects of the

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tsunami, which is reported to have claimed the lives of over 10,000 Japanese citizens and displacing  thousands more.  In order to mitigate the immediate risks of inflation and keep a strong currency from slowing rebuild efforts, the G7 nations have united to expedite the sell of massive quantities of yen.  In time, and with the aid of the rest of the world, Japan will build back to it’s super-power state.

BUT –I’m not writing to recognize the trials and tribulations of Japan and its people, or how Japan’s allies aid them.  My concern is that Japan’s sudden loss in economic output will allow the looming China economy to pervade more quickly in its move for dominance.  While China continues to state that it seeks a peaceful rise in economical affluence and power, its policies and actions have shown different.  And with the Japan’s rapid decrease in commerce, the requirement for goods once provided by Japan will soon be enveloped by China’s eager spread.  Few have yet to realize just how much a barrier Japan provided in China’s outward growth towards the West.  With that barrier now gone, there is nothing holding China back.

In ranking order, the US still remains the dominant economic power (and from this economic might, the dominant military power as well) in the world at over $14.72 trillion in GDP.  China follows after with $9.872 trillion in purchasing power, having surpassed Japan in 2010 as the world’s 2nd largest economy.  With its current growth rate and without significant changes in the near future, China is expected to become the #1 economy in the world (surpassing the US) by 2015.  And this is just a recent estimate.  10 years ago, economists gave the expectation of China’s supremacy at 2020.  It probably doesn’t benefit the US that it’s just recovering from a recession that began in 2008.  Even now, we face record deficits, high unemployment rates, and a risk of returning back to our economic slump.  While China too, suffered from the global recession in 2008, its earlier investments in infrastructure and commerce allowed it to rebound quickly and pulled even further ahead.  The scary part is that both the rise AND rebound was done with only a portion of their population.  The majority of Chinese still live in poverty, even some of their middle class functioning off annual salaries of $7,000.  China’s unemployment rate is somewhere around 2% (if reported correctly), and their children continue to achieve higher scores in the maths and sciences, compared to US students.

China continues to devalue its money to benefit from a high rate of exports, beating out all countries, numbers-wise.  Recently, Chinese officials have agreed to begin raising the value of the renminbi to its true value, though at a snails pace, and at a rate that would not reach its full capacity until 25 years from now.  This devaluement in currency undermines the ability of the US (and all other countries) to trade at a competitive rate which only aids China’s rapid rise.  Add their massive investments in infrastructure and their buying of large quantities of US debt, and you have a country who will soon vie for power with the current leading nation –us.

Until last year, Japan remained the #2 largest economy in the world, as it had for decades.  Focusing its markets on technology and automobiles  in 80s by using cheap labor and quality production, shot it’s economic status past the European competition in only a few years.  China’s communistic government remained a threat to the US (the Cold War was still going on) so the US were more than happy to allow Japan’s uninhibited rise to power.  Unfortunately, that rise got a little out of hand.  Much like China does today, Japanese state banks retained almost no liquid assets, instead allowing fast and cheap loans to continuously fund private projects.  While easy access to money stimulates growth and revenue, the acquiring a mass of loans that go into fault can counteract any growth.  This uncontrolled fluidity in money and bad loans caused the major Japanese banks to fail, bringing a decade of an abysmal market economy, leaving the country struggling to recover.  Learning from the Japanese mistakes, China began its fast and furious investment in more sustainable growth, like infrastructure and US debt.

The 90s meant slow or no growth to Japan’s markets, yet still provided a buffer zone of competition for China.  While China could mass export cheap goods along with cheap labor, Japan could counter with low prices and better quality goods.  When labor costs from profits in exports increased in both, competition only further increased as the two began to export their manufacturing requirements to surrounding Asian countries (Phillipines, Laos, and Cambodia).  Japan, the long reigning champ of the Asian economies and trade alliances like ASEAN, became threatened when China made concessions with the same alliances for the largest regional, free-trade agreement in the world (bigger than NAFTA which by the way, the US is currently balking on).  In reaction, Japan began hosting ASEAN commerce conferences without China involvement, making their own free-trade concessions.  This tit-for-tat continued through the decades as Japan and China have attempted to one-up each other.

The US has only benefited from the continual bickering between China and Japan.  The US economy has had it’s own issues, struggling in economic growth for the past two decades with the loss of manufacturing jobs to developing countries (manufacturing was the key factor in rapid American growth after WWII; with Europe’s factories blown apart, who else could produce en masse?).  The recognition of those issues have only begun to surface (hindsight is 20/20) in present day, Japan no longer capable being our line of defense from China.  It seems Japan’s buffer only managed to stem the tide of an upcoming onslaught of cheap goods and labor that the US cannot rival.

Japan’s manufacturing market is effectively crippled for years to come.  And initial assessments show that EVERY country is being hit with the repercussions of a sudden lack of goods.  Even now American, Korean, and European factories have been forced to close from lack of parts, more so in their automotive sectors.  In order to fill this demand, SOMEONE will eventually have to step up and provide the dropped supply.  And who other than China, who’s market is most similar to Japan’s (pre-Tsunami).  If one thought China’s barreling economic rise was dangerous now, they ain’t seen nothing yet!

There is nothing stopping an increased supply of Chinese goods from flooding American markets, including other markets that China was effectively locked out of due to Japan’s superiority.  The Phillipines massive population of cheap labor is no longer under the sway of Japan as the country struggles to provide its own people with basic needs.  In other words, greater access to cheaper Chinese goods with greater supply.

Until a week ago, Japan powered many of China’s eastern cities along the coast.  While a sudden lack of power supply will temporarily set China back in growth, China has gone on (post-tsunami) to make conciliatory promises just in the last few days to build even MORE nuclear power plants.  In other words, while the rest of the world is scaling back on nuclear power and relying more on it’s diminishing fossil fuels, China is successfully weaning itself off of oil.  It should not be a surprise as to which supreme power will hurt the most once the oil is gone.

In all the doom and gloom, there is no better time for the US to pick itself up, dust itself off, and continue its lead as the sole, global power.  This is not the time to be turning away from nuclear energy and back towards fossil fuels.  The recent hike in gas prices should be enough to tell any American that they can only afford only so much per gallon.  Take the lessons from Japan’s aftermath and use it as an opportunity to ensure that the nuclear power that IS built, is safe and controllable.

There is no better time to reassess implementation of the education system and reclaiming the leading title the US had only a few decades ago (perhaps by even using methods from the Asian states).

Last of all, this is the time to reinvest in infrastructure, something remiss for years now.  Increase rail construction, repair the 50,000 dams that are presently failing, and widen roads in order to speed commerce (unlike Europe who ships mostly by train, most US freight is carried by eighteen-wheelers).  Not only will these solid investments increase productivity across the board, but have the underlying effect of decreasing unemployment rates!  China may continue to grow in strength and power, but it’s a lot more difficult the US when it’s growing at the same rate.

 

 

Map showing ASEAN member states Legend ██ ASEA...

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